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A bill overhauling bank taxes in Ohio passed committee yesterday and should pass the full Senate
today, despite objections from Democrats who say they still are not sure the bill is raising the
revenue needed to ensure it is not giving the industry a tax cut.

The bill underwent a number of changes yesterday, including one that ensures payday lenders do
not get a tax cut. Lawmakers said the House-passed version of the bill inadvertently gave the
short-term lenders a lower tax rate. A number of other changes were made at the request of the
Kasich administration and various banks and financial institutions.

The measure, proposed by Gov. John Kasich in the spring, is designed to create a fairer bank-tax
system by replacing two current bank taxes with a broad financial-institutions tax.

But there has been ongoing debate about whether the revenue needed to truly make the plan
revenue neutral is the $225 million as estimated in Kasich’s original bill, or the $200 million
target set by the House, after Republicans made changes that would bring in less money.

The Senate-passed version sticks with the $200 million target, though rates can be adjusted if
actual revenue comes in more than 10 percent above or below that figure. State Tax Commissioner Joe
Testa said he expects that bill to bring in actual revenue of between $200 million and $225
million.

“The bill is revenue neutral,” said David Goodman, director of the Ohio Department of Commerce.
He and Testa have led Kasich’s effort to pass the bill.

Sen. Charleta B. Tavares, D-Columbus, the top-ranking Democrat on the Ways and Means Committee,
said she voted against the bill based on a lack of information from the administration about how
the target revenue number was reached, and which revenue figure is accurate.

“We went back and forth on whether we had enough information to make a decision that we believe
was responsible and ensures financial stability for the state of Ohio and did not negatively impact
the state’s budget,” Tavares said.

But Goodman and Testa said there were multiple efforts to meet with Tavares, and information was
sent to members of both caucuses. “Fine, state the reasons for opposing it,” Testa said. “But just
hiding behind the fact that they think they didn’t get information they’ve received multiple times
is disingenuous.”

House Bill 510, which must get a final House concurrence on changes before going to Kasich for
his signature, eliminates the dealers-in-intangibles tax and the last remnants of the corporate
franchise tax. It closes a loophole used by a handful of the largest banks operating in Ohio, and
places banks under a new three-tiered financial-institutions tax that is designed as a broader tax
with rates to benefit smaller, community banks.

Zach Schiller, research director for Policy Matters Ohio, a liberal-leaning research group, said
the bill “still leaves Ohio’s nine or 10 largest financial institutions paying a special low rate
on much of their capital.”

“The bill chips away at the tax base with a slew of changes,” he wrote in a memo to the
committee. “Millions of dollars of new exemptions and credits have been added. It’s hard to know
who will really benefit from some of these changes.”